July 29, 2004. The U.S. Court of Appeals (3rdCir) issued its
opinion [17 pages
in PDF] in The Pitt News v. Pappert, a First Amendment challenge
brought by a newspaper to a state statute that restrained certain speech -- paid
advertising of alcoholic beverages. The Appeals Court held that statute is
unconstitutional, but on narrow grounds specific to this restraint.

The plaintiff in this case is The Pitt News,
a newspaper created by the University Board of Trustees of the University of
Pittsburgh and operated as a student organization. All of its revenue is derived
from payments for advertisements published in The Pitt News. The defendants are
Gerald Pappert, who was sued in his capacity as the Attorney General of the
state of Pennsylvania, and other state officials.

The statute, enacted by the state of Pennsylvania, applied to speech by
newspapers and a broad range of communications media that are affiliated with
educational institutions. It banned speech that constituted "any advertising of
alcoholic beverages".

The statute applied to any "publication published by, for or in behalf of any
educational institution". It broadly covered publication "through the medium
of radio broadcast, television broadcast,
newspapers, periodicals or other publication, outdoor advertisement, any form of
electronic transmission or any other printed or graphic matter, including
booklets, flyers or cards, or on the product label or attachment itself."

As a consequence, The Pitt News lost advertising revenue, not only from ads
for alcoholic beverages, but from restaurants that held alcoholic beverage
licenses, including restaurants whose ads that did not reference the sale of alcohol. Revenues
decreased, and the newspaper was reduced in size. Competing newspapers and
broadcast media that targeted the University of Pittsburgh community, but that
were not affiliated with the University, were not affected by the statute.

The Pitt News filed a complaint in
U.S. District Court (WDPenn) against Pappert and others alleging that the
statute violates the First Amendment of the U.S. Constitution. The District
Court upheld the statute.

The Court of Appeals held that the statute is unconstitutional because it is
an impermissible restriction on commercial speech, and also because the law is
presumptively unconstitutional because it targets a narrow segment of the media.

Pennsylvania argued that the statute does not restrain speech. That is, The
Pitt News is free to publish information and advertisements for alcoholic
beverages. The statute merely prohibits The Pitt News from receiving payment for
such speech.

The Appeals Court rejected this argument. It wrote that "If
government were free to suppress disfavored speech by preventing potential
speakers from being paid, there would not be much left of the First Amendment.
Imposing a financial burden on a speaker based on the content of the speaker’s
expression is a content-based restriction of expression and must be analyzed as
such." The Court cited,
Simon & Schuster, Inc. v. Members of the New York State Crime Victims Bd.,
502 U.S. 105 (1991), which held unconstitutional New York's Son of Sam law.

Impermissible Restriction on Commercial Speech. The
Appeals Court's first of two reasons for overturning the statute is that it is
an impermissible restriction on commercial speech. The Appeals Court concluded at
the outset, without discussion, that this is a case involving "commercial
speech", and therefore must be reviewed under court create standards for
analyzing the constitutionality of restraints on commercial speech.

The Court summarized this test, quoting from Central Hudson: "First,
``we must determine whether the expression is protected by the First Amendment,´´ and
this means that “it at least must concern lawful activity and not be misleading.´´ ...
Second, ``we ask whether the asserted governmental interest is substantial.´´ ...
If the first and second ``inquiries yield positive answers, we must determine whether
the regulation directly advances the governmental interest asserted, and whether it is
not more extensive than is necessary to serve that interest.´´"

The Court held that under the first prong, the expression is protected by the
First Amendment. Second, it wrote that "preventing underage drinking and alcohol
abuse" are substantial governmental interests under the second prong. However,
the Court held, in applying the third prong, that the state has not shown that
its statute alleviates the harm.

The Court explained that "We do not dispute the proposition that
alcoholic beverage advertising in general tends to encourage consumption". But,
it continued that the prohibition "applies only to advertising in a very narrow
sector of the media (i.e., media associated with educational institutions), and
the Commonwealth has not pointed to any evidence that eliminating ads in this
narrow sector will do any good."

The Court also held that the statute fails to meet the fourth
prong of the Central Hudson test. There is not a reasonable fit between
the legislature's ends and the means chosen to accomplish those ends. The Court
noted that 75% of the University of Pittsburgh community is above the legal
drinking age.

Targeting a Narrow Segment of the Media. The Appeals
Court's second of two reasons for overturning the statute is that it targets a
narrow segment of the media. The Court discussed this concept at length. It
outlined the concerns raised by statutes that target some but not all media, and
suggested that "courts must be wary". In the end, it held that this particular
Pennsylvania statute impermissibly targets a narrow segment of the media.
However, there is no precise black letter statement of law in this opinion.

Perhaps, the reason for the Court's reluctance to articulate a specific
principle is that the law abounds with disparate treatments of different segments
of the information and communications media. The Communications Act and
Federal Communications Commission (FCC)
rules contain many such disparate treatments, as for example, in the different
regulatory regimes for broadband access services provided over DSL and broadband
access services provided by cable modem. Indeed, the FCC's existence, and
communications law, are both premised on the notion that certain communications
media (such as radio, television, cable, and satellite) should be subject to
regulatory regimes that are not applied to certain other communications media
(such as books, magazines, newspapers, pulpits, and lecterns). State and local
governments also impose different tax and regulatory regimes on newspaper,
telephone, cable and other types of companies.

Nevertheless, the Court did write that "laws that impose special
financial burdens on the media or a narrow sector of the media present a threat
to the First Amendment."

It added that "laws that impose financial burdens on a broad
class of entities, including the media, do not violate the First Amendment",
but, that "A business in the communications field cannot escape its obligation
to comply with generally applicable laws on the ground that the cost of
compliance would be prohibitive."

Finally, it wrote in vague terms that "courts must be wary that
taxes, regulatory laws, and other laws that impose financial burdens are not
used to undermine freedom of the press and freedom of speech. Government can
attempt to cow the media in general by singling it out for special financial
burdens. Government can also seek to control, weaken, or destroy a disfavored
segment of the media by targeting that segment."

Commercial Speech. The Court did reject Pennsylvania's argument that
there was no limitation on speech about alcoholic beverages. Pennsylvania had argued that
the statute
merely banned accepting payments from advertisers, which is not speech. The
Court also rejected Pennsylvania's argument that it imposed no financial burden
on a segment of the media. Pennsylvania had argued that it imposed no tax. The
Court reasoned that
banning payment for speech is like banning the speech, and that
banning a type of advertising revenue, while not a tax, has the effect of
imposing a financial burden.

The Court did not extend this type of analysis further. That is, newspapers
do not publish alcoholic beverage ads in isolation. They publish them as part of
a larger collection of content that includes current events, politics, social
commentary, and other categories of speech that the Courts do no relegate to the
less protected status of commercial speech. Moreover, limiting a newspaper's
ability to derive revenue from one type of speech, can have the effect of
limiting, or precluding, it from engaging in other, and more protected, types of
speech. Thus, the Court might have viewed the statute as a restraint of more highly
protected speech, and therefore, applied a strict scrutiny standard. But, it did
not.

The Court also did not address whether or not
legislative and regulatory processes are used to attack the revenue streams of
publications, for the purpose of limiting political speech. For example,
Katherine Graham argued that this happened when her newspaper, The Washington
Post, published stories related to the Watergate scandal. She wrote in her
biography,
Personal History [Amazon], that friends of former President Richard Nixon
challenged the Washington Post's FCC television broadcast licenses for its
profitable stations in the state of Florida. Graham wrote that the filing of the
FCC license challenges cut the Post's market capitalization by half.